9810153
B252382

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

Asociacion de Farmacias Region de Arecibo, Inc.,
a nonprofit corporation, and
Ricardo L. Alvarez Class,
individually and as an officer of
Asociacion de Farmacias Region de Arecibo, Inc.

DOCKET NO. C-3855

DECISION AND ORDER

The Federal Trade Commission ("Commission"), having initiated an investigation of certain acts and practices of the respondents, named in the caption above, and the respondents having been furnished thereafter with a copy of the draft complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission would charge respondents with violation of the Federal Trade Commission Act; and

The respondents, their attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all of the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purpose only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Act, and the complaint should

issue stating its charges in that respect, and having thereupon accepted the executed consent agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in § 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

• Respondent AFRA is a nonprofit corporation organized, existing, and doing business under and by virtue of the laws of the Commonwealth of Puerto Rico, with its principal place of business located at Suite 336, GPO Box 3016, Manati, Puerto Rico 00674.
• Respondent Alvarez, an individual, is an owner of Empresas Alvasie which operates Farmacia Elda in Manati, Puerto Rico, and is AFRA's former President and current Treasurer. Respondent Alvarez's principal place of business is located at Barrio Cantera Carr. #2, Km. 44.5, Manati, Puerto Rico 00674.
• The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER

I.

IT IS ORDERED that, for the purposes of this order, the following definitions shall apply:

A. "AFRA" means Asociacion de Farmacias Region de Arecibo, Inc., its directors, officers, employees, agents, representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups, and affiliates controlled by the Asociacion de Farmacias Region de Arecibo, Inc., and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

B. "Commission" means the Federal Trade Commission.

C. "Payer" means any person that purchases, reimburses for, or otherwise pays for all or part of any health care services for itself or for any other person. Payer includes, but is not limited to, any health insurance company; preferred provider organization; prepaid hospital, medical, or other health service plan; health maintenance organization; government health benefits program; employer or other person providing or administering self-insured health benefits programs; and patients who purchase health care for themselves.

D. "Person" means both natural persons and artificial persons, including, but not limited to, corporations, unincorporated entities, and governments.

E. "Provider" means any person that supplies health care goods or services to any other person, including, but not limited to, physicians, pharmacies, dentists, hospitals, and clinics.

F. "Participating pharmacy" means any pharmacy that is a member of AFRA.

G. "Qualified risk-sharing joint arrangement" means an arrangement to provide services in which (1) the arrangement does not restrict the ability, or facilitate the refusal, of pharmacy providers participating in the arrangement to deal with payers individually or through any other arrangement, and (2) all pharmacy providers participating in the arrangement share substantial financial risk from their participation in the arrangement through: (a) the provision of services to payers at a capitated rate; (b) the provision of services for a predetermined percentage of premium or revenue from payers; (c) the use of significant financial incentives (e.g., substantial withholds) for its participating providers, as a group, to achieve specified cost-containment goals; or (d) the provision of a complex or extended course of treatment that requires the substantial coordination of care by different types of providers offering a complementary mix of services, for a fixed, predetermined payment, where the costs of that course of treatment for any individual patient can vary greatly due to the individual patient's condition, the choice, complexity, or length of treatment, or other factors.

H. "Qualified clinically-integrated joint arrangement" means an arrangement to provide services in which (1) the arrangement does not restrict the ability, or facilitate the refusal, of pharmacy providers participating in the arrangement to deal with payers individually or through any other arrangement, and (2) all pharmacy providers participating in the arrangement participate in active and ongoing programs of the arrangement to evaluate and modify the practice patterns of, and create a high degree of interdependence and cooperation among, the pharmacies participating in the arrangement, in order to control costs and ensure quality of the services provided through the arrangement.

I. "Reimbursement" means any payment, whether cash or non-cash, or other benefit received for the provision of pharmacy goods and services.

II.

IT IS FURTHER ORDERED that each respondent, directly or indirectly, or through any corporate or other device, in connection with the provision of pharmacy goods and services in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44, cease and desist from:

A. Entering into, adhering to, participating in, maintaining, organizing, implementing, enforcing, or otherwise facilitating any combination, conspiracy, agreement, or understanding to:

1. Negotiate on behalf of any participating pharmacies with any payer or provider;

2. Deal or refuse to deal with, or boycott or threaten to boycott, any payer or provider;

3. Determine any terms, conditions, or requirements upon which pharmacies deal with any payer or provider, including, but not limited to, terms of reimbursement; or

4. Restrict the ability of participating pharmacies to deal with payers individually or through any arrangement outside AFRA.

B. Encouraging, advising, pressuring, inducing, or attempting to induce any person to engage in any action that would be prohibited if the person were subject to this order.

PROVIDED that nothing in this order shall be construed to prohibit any agreement or conduct by either respondent that is reasonably necessary to form, facilitate, manage, operate, or participate in:

(a) A qualified risk-sharing joint arrangement; or

(b) A qualified clinically integrated joint arrangement, if the applicable respondent has provided the prior notification(s) as required by this paragraph (b). Such prior notification must be filed with the Secretary of the Commission at least thirty (30) days prior to forming; facilitating; managing; operating; participating in; or taking any action, other than planning, in furtherance of any joint arrangement requiring such notice ("first waiting period"), and shall include for such arrangement the identity of each participant, the location or area of operation, a copy of the agreement and any supporting organizational documents, a description of its purpose or function, a description of the nature and extent of the integration expected to be achieved and the anticipated resulting efficiencies, an explanation of the relationship of any agreement on reimbursement to furthering the integration and achieving the expected efficiencies, and a description of any procedures proposed to be implemented to limit possible anticompetitive effects resulting from such agreement(s). If, within the first waiting period, a representative of the Commission makes a written request for additional information, the applicable respondent shall not form; facilitate; manage; operate; participate in; or take any action, other than planning, in furtherance of such joint arrangement until thirty (30) days after substantially complying with such request for additional information ("second waiting period") or such shorter waiting period as may be granted by letter from the Bureau of Competition. Early termination of the waiting periods in this paragraph may be requested and, where appropriate, granted by letter from the Bureau of Competition.

PROVIDED FURTHER that nothing in this order shall be construed to prohibit respondent Alvarez from negotiating with any payer or provider on behalf of pharmacies that he:

(a) owns; or

(b) operates pursuant to a contract, provided that respondent Alvarez submits written notification and a copy of the contract to the Commission within ten (10) days of entering into any such contract and refrains from negotiations with any payer or provider for at least thirty (30) after providing such notice.

PROVIDED FURTHER that nothing contained in this Order shall be construed to prevent any respondent or respondents from engaging in the bona fide exercise of rights permitted under the First Amendment to the United States Constitution to petition any federal or state government executive agency or legislative body concerning legislation, rules or procedures, or to participate in any federal or state administrative or judicial proceeding.

III.

IT IS FURTHER ORDERED that respondent AFRA shall:

A. Within thirty (30) days after the date on which this order becomes final, distribute by first-class mail a copy of this order and the accompanying complaint, as well as certified Spanish translations thereof to each person who, at any time since November 22, 1994, has been an officer, director, manager, employee, or participating pharmacy in AFRA.

B. Within thirty (30) days after the date on which this order becomes final, distribute by first-class mail a copy of this order and the accompanying complaint, as well as certified Spanish translations thereof to each payer or provider who, at any time since November 22, 1994, has communicated with AFRA concerning any desire, willingness, or interest in contracting for pharmacy goods and services with AFRA members.

C. For a period of five (5) years after the date this order becomes final:

1. Distribute by first-class mail a copy of this order and the accompanying complaint, as well as certified Spanish translations thereof, to each new AFRA member within thirty (30) days of his or her initial participation, and

2. Annually publish in any official annual report or newsletter sent to all participating pharmacies, a copy of this order and the complaint, as well as certified Spanish translations thereof, with such prominence as is given to regularly featured articles. If no such annual report or newsletter is sent to participating pharmacies, AFRA shall annually, on the anniversary of the date this order becomes final as to AFRA, distribute a copy of this order and the complaint, as well as certified Spanish translations thereof, by first-class mail, or at a formal meeting of AFRA, to all participating pharmacies.

IV.

IT IS FURTHER ORDERED that:

A. Within sixty (60) days after the date this order becomes final, each respondent shall submit to the Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with Paragraphs II and III of this order.

B. One (1) year from the date this order becomes final, annually for the next five (5) years on the anniversary of the date this order becomes final, and at other times as the Commission may require, each respondent shall file a verified written report with the Commission setting forth in detail the manner and form in which it has complied and is complying with Paragraphs II and III of this order.

V.

IT IS FURTHER ORDERED that AFRA shall notify the Commission at least thirty (30) days prior to any proposed change in AFRA, such as dissolution, assignment, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in AFRA that may affect compliance obligations arising out of this order.

VI.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this order, upon written request, each respondent shall permit any duly authorized representative of the Commission:

A. Access, during office hours and in the presence of counsel, to all facilities and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda, calendars, and other records and documents in the possession or under the control of that respondent relating to any matter contained in this order; and

B. Upon five business days' notice to a respondent and without restraint or interference from that respondent, to interview that respondent, or officers, directors, employees, or other representatives of that respondent.

VII.

IT IS FURTHER ORDERED that this order shall terminate on March 2, 2019.

By the Commission
Donald S. Clark
Secretary
SEAL
ISSUED: March 2, 1999